Awareness and uptake in government investment schemes uneven

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11 Sep 15

The system of claiming tax relief on investments should be used by the government to make investment easier and realise the potential of existing schemes, a new report by the Institute of Directors (IOD) argues.

Focusing on the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), it claims that a lack of knowledge and uptake are holding the schemes back.

Of the £1.6 billion invested in around 24,000 companies through EIS/SEIS in 2013/14, 95% of this money came from large investors. Furthermore, 69% of the total was invested in businesses in London and South East.

A lack of awareness of the schemes seems to be the main reason behind this uneven picture. Less than two fifths of the business leaders knew about EIS.

The IOD is calling for the government to take the following actions:

increase promotion of EIS and SEIS as funding options

tax relief on investments of less than £2,000 to be handled by a new, online-only system

a new ‘super-ISA' to include EIS and SEIS investments

an ‘aggregator fund' to help smaller investors to be set up by government and industry bodies.

The report also suggests that a pilot scheme should be launched in the North West in order to test the impact of a higher regional rate of tax relief for SEIS.

Jimmy McLoughlin, deputy director of policy at the IOD, said:

"Britain's start-up scene is thriving. More than 2 million businesses have been created in the last 4 years and more and more people are carving out their careers as an entrepreneur. There is a real appetite across the country for owning and investing in businesses and Britain tops the European league tables when it comes to the best place to start a new enterprise.

"EIS and SEIS can open up the equity economy and help more people take a stake in the start-up revolution taking place around the country. Too few businesses, however, are aware of these schemes, and not enough investors feel confident enough to get involved."

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